I was asked recently what network marketing was and why it attracted me as a solution to creating a sustainable retirement plan that means I won’t have to downgrade my lifestyle when I stop working.
To be honest with you, it was a question I asked myself just over a year ago. When I first heard the term network marketing it sounded a bit mumbo jumbo to me. But luckily I found some good books on what it is and isn’t and had some great advice from mentors.
So, when asked recently, I tried to give a succinct answer but one that explained why I think it is a great option for just about everyone.
Building your own business
Before I get to leverage, I just want to go over some of the other basics for building a business - your own business.
The traditional model will have you forking out quite a bit of money before you even get started - premises, stock, advertising etc. If you want a business already set to go, you could buy a franchise but they aren’t cheap.
Then you will have to consider logistics and return policies etc etc etc.
The network marketing model looks like this - you don’t have to carry any stock or to have premises you work from - you can work from home or wherever you have a laptop - think beach, cafe.
You don’ have to worry about logistics or return policies as the company covers all that. Depending on the company you align with, it may be a completely free start up - the company I’m with offers that. Some companies have a start-up kit to buy. You have to factor that in, but even a start-up kit is much less than a franchise would cost you.
Then it’s a matter of sharing what you love about products with people you like - your network. It’s word of mouth (or social media posting) advertising by real people. That’s why it’s called network marketing.
Network marketing companies don’t have ad campaigns because they have you to put the word out. So the millions of dollars that would be paid to some already extremely wealthy actress in some hideously expensive advertising shoot is money that can be put back into research and development and paid back to the distribution force - yes, that’s you, the network marketer.
What Network Marketing is Not
Let me be clear, network marketing is a real thing. It has lots of advantages but it is not a get rich quick scheme.
Maybe because it is so easy to set up your own network marketing business, there may be a perception that it’s easy and the money just flows. No, it isn’t easy, but then again it isn’t hard. It just takes a vision of what you want to achieve and daily consistent action to achieve it. The key is that persistent, consistent action.
The Pyramid Thing
Let’s address the elephant in the room - there usually is one somewhere and the pyramid thing is often it.
So, first of all, network marketing is not a pyramid scheme. So-called pyramid schemes are not legal whereas network marketing is highly regulated and overseen by the Direct Selling Association (DSA) - there will be one in your country.
Yes, this is a business where you build a team. But your success comes from actually selling something. It isn’t a promise of something maybe in the future.
Perhaps because of past companies structures, there’s a belief that you are only successful if you get in at the start. Well, this is not the case, although, obviously the earlier you do start the earlier you’ll find success.
Although you build teams, in my company anyway, a team member you introduce can do much better than you. Why? Well, it comes down to the fact that success is directly related to products you sell. That’s because it is a real business.
Network marketing has got a bad rap in the past. I have heard stories of people who got burned with one company or another or perhaps they’ve been sold an unrealistic picture of what it takes when they sign up. Now, because of the oversight of the DSA and the many regulations, these stories a much less prevalent.
Leverage - the exciting bit
The thing that makes network marketing so attractive, though, is the leveraged income. You may know this as passive or residual income, but basically it’s income that keeps coming in even when you’re not working.
It’s the leveraged income in network marketing that allows you to build your network over a short period - most companies have a four year programme but some people do it more quickly and others take longer - that then provides you with the leveraged income that will continue well into your retirement,
This has led to books like ‘The Four Year Career’ by Richard Brooke - basically, if you work hard for four years creating leverage by building your network, you can then retire and live off the earnings. And in my company, you can even will your leveraged income to your dependents.
A Million Dollars today or One Cent a day for a month?
Building leveraged income is a bit like the latter of this example. I could give you $1million today or I could give you $0.01 a day for 30 days.
So, with $0.01 a day for 30 days, in 10 days you’d have $5.12 in 10 days - not that exciting yet, right?
In 20 days, you’d have $5,242.88. Are you wishing you said, ‘I’ll have $1million right away, please’. Don’t worry - as long as you don’t quit, when it gets to day 30, you will have $5,368,709.12. Yes, more than 5 times what you could have taken, if you didn’t get how this worked.
It takes time to build the leverage, but once you have it snowballs and it doesn’t stop.
Linear vs Leveraged Income
If that example doesn’t excite you, then let me compare it with linear income. Linear income is traditional income you get for working and you get paid only when you work (or are on paid leave, which has a limit as you know).
So, here’s a quick bit of maths:
You work 40 hours a week and you do that for 52 weeks a year - that is 2080 hours/year
You work like this for 45 years and over that time you work a total of93,600 hours.
So, you get paid for 93,600 hours in your lifetime and then it’s up to you to survive on your savings, your retirement plan and government pensions.
What about leveraged income?
Well, let’s be conservative and say you introduce 5 other people into your network to do what you do - just pure duplication of what you do.
Then each of those 5 introduce 5 other people into their network (which is your network), so that’s another 25 people and then those 25 people introduce 5 people and that’s another 125.
So now we 5 plus their 25 plus their 125 which makes a total of 155 people.
Let’s say each of your team works 10 hours a week (because we want to have time to enjoy life), that’s 1550 hours/ week so in a year, your network has worked 80,600 hours.
So, do you choose to work the traditional way for 40 hours a week over your lifetime and be paid for just over 90,000 hours, OR do you choose to build a network where if everyone works for 10 hours a week for just one year, you can get paid for over 80,000 hours.
And do that again for a couple of years and that’s a business that will sustain you for quite a while.
What does Leverage Mean to Me?
Leverage to me means FREEDOM. Time freedom and financial freedom. It means I’m free to travel and spend time with the people I love.
Building a network marketing business is not something I would have imagined even 2 years ago, but I get it now. I have my vision and I’m prepared to make it happen.
One of the best things for me is that along the way to building my freedom, I also help other people build theirs. That’s very exciting and completely in alignment with how I see myself in the world. Supporting and empowering others and making a positive impact on the world.
Are all Network Companies Created Equal?
I can’t say I’m an expert on every network marketing company out there and there are a lot, but I can give you a checklist to consider when choosing a company.
- Trends: it probably doesn’t need to be said, but you are unlikely to make a sustainable business if you choose a company that makes portable cassette recorders. Once upon a time, maybe, but the iPod means that ship has well and truly sailed. I looked at trends and found that health and wellness, including anti-ageing and youth preservation, were trillion dollar businesses and trends that would continue
- Products: as I mentioned, network marketing is a real business so you have to sell something. Looking at the product range is key when deciding on a company. I looked for a company where there was innovation backed by a very sound scientific base with cutting-edge research and development and a rigorous quality assurance program. My geeky side needed to be satisfied that I was promoting quality products that were created from the best of nature and the best of science and that these made a real difference
- Company: you need to know that the company you align with isn’t going out of business next week and in reality, that’s not something you can be absolutely sure of, but there are certainly clues. I chose a company that has been around for over 30 years so I know they have sustainability. They are on the New York Stock exchange so I know there is transparency and I can check credit ratings etc (and I have and I’m suitably impressed). But it’s not just about how long the company has been around, it’s about how they are growing and I chose a company with exponential growth and one that also had global reach (as I do spend time in the UK every year)
- Compensation Plan: this is how you get paid and probably every company will tell you that they have the best plan. And to be honest, when starting out it can be a bit confusing understanding the plan. In the end, I looked at overall performance and saw that my company had made more million dollar earners than several other top companies combined. That told me the compensation plan worked for distributors not just the company
- Timing: when is the right time to join or to start? From what I know now, I’d probably say ‘yesterday’. But as that has passed, the next best day is today. In the Pacific in the last 12 months, there has been an increase of over 20% in customers, executives and in volume of product. This is a great time to be involved
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